David Chaston points out that the new 39% income tax rate won't work as intended. It will just re-incentivise the housing distortion, sad because the real answer has been in plain sight for a decade

David Chaston points out that the new 39% income tax rate won't work as intended. It will just re-incentivise the housing distortion, sad because the real answer has been in plain sight for a decade

In 1999, Helen Clark won an election, promising many changes. Many changes were delivered, mainly around delivering enhanced public services.

One policy designed to pay for the much increased public spending was to raise the top income tax rate to 39% from 33%. This aspect was pushed through with priority.

But there were unintended consequences.

A policy designed to have the well-off paying for more 'free' services was sold as a fairness issue. A more 'progressive' rate scale was expected to add to political notions of fairness.

But a 39% personal rate will only really be progressive on employment and personal services income - income earned from personal effort.

It didn't apply to that part of the economy requiring no personal effort - unearned income. Income like capital gains from real estate.

The policy gave a massive incentive for those who could, to switch their effort and investment into sections of the economy where capital gains could be captured.

And huge numbers of people did.

Over the next five years, house prices rose from +5% or less per year to over +20% per year, and all tax-free.

In 2020 2019, Jacinda Ardern won an election, promising many changes after a first term of very few changes. COVID happened however, and a huge increase in Government spending was required, funded mainly by unprecedented rises in Government debt.

One policy designed to pay down that debt was to raise the income tax rate to 39% from 33%. This aspect was pushed through after the election was decided, with priority.

This time, well-to-do taxpayers were ready. Rather than having to discover the work-around over a number of years, they had their playbooks ready after a quick search in a dusty drawer.

There was no time to lose. Before 2020 ended the frenzy started.

Knowing what happens in this scenario, the bidding for assets that gave tax-free capital gains started, but this time they have started in a market that was already rising.

Readers can imagine what will happen next. Likely it will make the 2000-2004 house price rises look tame and restrained, even though that earlier period generated huge gains for the asset-rich well-to-do. This time we may have to re-define 'huge'.

The irony however is that the solution to this crazy distortion is staring us in the face.

Such gains are only possible when demand far outstrips supply in an environment where these types of gains are excluded from the tax base.

The solution is "Christchurch".

The earthquake damage in 2010 and 2011 required the whole eastern section of that city to be basically abandoned, and a massive housing rebuild in western areas. The building continues today.

The scale of that event resulted in huge numbers of new houses built in a relatively quick timeframe. Old, tired housing stock was either demolished, or if not, it was rented cheaply after being refurbished.

So much new housing stock was added that it met or even slightly exceeded demand. House price increases in the Garden City have never taken off like in the rest of the country, and probably never will. They have an adequate supply of new, high-standard housing which can meet current demand. And at prices that first home buyers can generally afford. In the year to December 2020, CoreLogic reports that Christchurch house prices rose a modest +6.2%, the least of any main center and the slowest rise of any urban center (apart from tourism-ravaged Queenstown). That is half the rate for the rest of the country.

So the model is there, tested and proven that adequate housing supply can avoid house price distortions and keep housing affordable.

The problem is that policy makers have turned a blind eye to the Christchurch housing results.

The behaviour in the rest of the country to seek tax-free capital gains is a symptom, a response to a policy signal. Get the policy right on housing (build aggressively until we have enough modern, good quality stock, and don't put artificial cost floors in the way like the RMA/urban-rural boundaries/etc.) and a 39% income tax rate might work. But it won't when there is such an easy and profitable way to avoid it.

People respond to incentives. They respond to disincentives too.

Helen Clarks 39% income tax rate failed, leaving behind a distorted economy. It was from that event we started talking about the New Zealand economy being "just a housing market, with a few trees, cows and mountains on the side".

This time, Jacinda Ardern's 39% income tax rate is coming on top of two decades of compounded distortions, and unless those distortions are sorted out, it will fail too.

New Zealand needs those for whom the 39% tax rate is targeted to invest in our productive economy - after all they are the best placed to do so. But why do that when tax-free gains can just fall from the sky when you buy houses?

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70 Comments

So we know the govt is gonna do something to try and show they mean bunsiness re house inflation. But what?
So I’m wondering David, is this article a random or are you hearing things?
Go help us if this is all they can come up with.

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Then best you start praying for help bud.
This Govt had the opportunity last round with Kiwibuild but it was such an amateurish disgraceful B@##!up they'll not do anything remotely effective. But hey.. 50% of the electorate voted for the retards so they get what they asked for. Add to that the nearly 500K apathetic lazy ne'er do wells between 18 and 29 that were registered but couldn't be fagged.. what do you expect??

You can blame Labour for that too.. charter schools are desperately needed. These 18-29 year old "ne'er do wells" that you claim couldn't be tied to a pile of sticks .. well, they actually often don't understand how our governmental and our parliamentary systems work.

Teacher unions/lobbies are a scourge.. they cause bottle necking. Low quality 'teachers' should be struggling to stay employed, NOT enjoying tax-payer-funded job security for a job they're NOT suited for!

I'm sure these low quality teachers would excel in other professions. Everybody has the ability to teach, but I think being a teacher could be.. maybe.. more a spiritual gift. More civics education is needed in society and less propaganda.

what do you mean by 'bottle necking'?

Glad you asked; 'Bottle Necking'; it's more an American term, used by John Stossel.

It refers to the practice of making it cumbersome/near-impossible for new businesses to enter an industry. Often done through odious regulation. Often these regulations are written BY or FOR organizations/companies to again, STOP new businesses entering an industry.

So my contention is; there is bottle necking happening in the Primary and Secondary Education Industry, which isn't an industry due to bottle necking .. lol

An Example:
Two Grannies are reported by Mega Corp Jam for making-n-selling Granny Jam, but without a license OR registered commercial-kitchen. Mega Corp Jam'Bottle Necked' the Grannies by lobbying for law changes; requiring persons producing 100+ jars-of-jam to work out of a Commercial Kitchen. On top of that Mega Corp Jam lobbied for increased health-n-safety requirements .. forcing up the cost of Commercial Kitchen Licenses to $50,000 per year.

Mega Corp Jam is a 'bottle necker'.

ZackB... can the phrase bottle necking be used in relation to new people permanently entering a country? For example, could we say that a bottle necking immigration policy for the next few years would be bound to have a positive and significant impact on some of NZs most concerning problems such as high rents, house price inflation, further marginalization of the poor through increased competition for (un)skilled jobs, traffic problems and water shortages? I guess we would call that positive bottle necking.

I don't get what you mean in relation to education. You know the starting teacher salary is something woeful like $53k right? To work 50-60hrs and to try and teach 30+ kids in a classroom. Whose idea was that anyway? Should be a 1:10 teacher-student ratio. I'm pretty sure the teacher unions are just trying to get outcomes for all NZ kids rather than charter schools who just cherry-pick their students. Does well resourced, respected, equitable education precede prosperous, modern, low-crime countries? I dunno, maybe ask Finland or Singapore. Charter schools? Maybe visit WashDC and see how they're going there...

Your comment is very evenly toned, so thank you for that. :) If Charter Schools can cherry-pick their students (which could be Bottle Necker propaganda) isn't that an indication of demand for different education options?

With such great demand for Charter Schools and declining competency in STEM subjects, why the lack of Charter Schools? Could it be those running the current system don't want to seed their power? Could teachers be bogged down with paperwork and high student loads due to Bottle Necking policies?

Please note, many of these teachers earning 53k per year might be happier and better paid in a charter school. It's not just school choice for students, but teachers too. NZ polytechnics for example have become so Bottle Necked the state pretty much accepts new models are needed there..

Great teachers should be on the salary of a Back Bench MP. MP's have to get elected every 3 years and fight their way up the ranks. I'm not suggesting the teaching profession becomes a blood sport .. but low quality teachers sucking at the government teat for decades.. doesn't add up.

Well, why not pay ALL teachers substantially more...? (Proficiency based pay does not work because you don't know who is "chummy" with the principal, and is a huge disincentive to the collegiality that traditionally has made New Zealand schools work so well)
Why should charter school teachers get paid more than hard-working teachers in state schools? (Some of whom are working in extreme conditions)
Personally I have found the financial rewards of investment property far more lucrative as well as being immeasurably less stressful than teaching!
The constant checking on teacher performance where they are expected to justify their existence (as insisted on by the Ministry of Education, and right wing pundits) is exhausting and perhaps has had a negative effect on STEM subjects due to less time spent on actual teaching all parts of the spectrum of ability and not just concentrating on the few "just below" to be "at" a standard.. purely for the sake of appearances.)
The problem is of course that teaching is regarded as "women's work" therefore poorly regarded and underpaid.
Substantially increase teacher salaries and you will get a high calibre of applicants as well as more men. (Is that not what is in fact working for charter schools?)

Charter schools provide a method of doing things differently for proportion of kids that mainstream school doesn’t serve well. Kelvin Davis said that there are charter schools that were working really well and that he would resign if they were closed. They put a different label on them so he didn’t have to and Labour could keep their promise of closing them.

https://hbr.org/2014/12/the-problem-with-guilds-from-silversmiths-to-tax...

Bottlenecking also called guilding. Trade associations... etc....

Fine line between vested interests and benefiting the common good.

Yoy could argue that lots of the new big tech money is focused on finding big cumbersome inefficient guilds and then busting there markets.

This is the way

Do we really believe anyone will be leaving a $200k+ job, to instead target exclusively surviving on capital gains, to avoid 6c in the dollar tax on some of their income?

I know a lot of people on $200k-$500k, and all think a bit extra is fair and won't rock the boat.

Officebound. The people you describe in a "job" ie are employed salaried workers. They are not rocking the boat because they really can do nothing about it. They are trapped by PAYE and it just going to disappear from their pay. Not rocking the boat because they are already beat.
There are lot's of other people who are owner operator's etc, who do have options about how to arrange things.

Well, it's clear policies have been driving up house prices.. but to keep prices doubling requires:

- More liquidly (money printing) for retail banks [check]
- RBNZ to keep lowering the 'cash rate' [check]
- Low deposit lending [neutral]
- High immigration/tourism [fail]
- Rental shortage [check]
- Increasing over crowning of properties [check]
- Longer-Term/Intergeneration-Mortgages [fail]
- Interest only mortgage terms [neutral]
- Increase government subsidies for property buyers [low-fail]
- Future loosening of the foreign buyers ban [low-fail]
- Mass X-pat buying [low-fail]
- High birth rates [fail]
- Meaningful employment figures [low-fail]

A interesting high fail rate, but as David alludes to; Labour seem intent on driving money into housing despite the deleterious effect on the domestic economy.

Labour seem intent on driving money into housing despite the deleterious effect on the domestic economy

Not Labour. The ruling elite. That includes the govt, central bankers, retail bankers, and even academia.

Because the nation's savings is overwhelmingly in the housing stock (the banks' lending into existence to bid prices higher), they believe that if 'savings' decrease, less is spent into the consumer economy (approx 65% of GDP) and the whole shebang goes into a negative feedback loop.

So I understand the ruling elite's concern. But it is a mess of their own creation.

The ruling elite is not as you described. Plenty of academics have been agitating for governments to pull finger and do what is required. They are ignored on this issue, but start talking woke and bam there they are

Yes and no. The mindsets of our central bankers, commercial bankers, and politicians are shaped by prevailing dogma. That dogma is generally ingrained from education. Usually, academics who challenge the status quo face quite a number of professional and social hurdles.

Yeah. The academic orthodoxy in economics departments is very different from the orthodoxy in, say, sociology departments...

Lol. I'd agree 100% with that statement. A friend who completed his MBA recently told me one lecture consisted of 10 minutes spent on economic policy pre-1984 and the rest singing the praises of Rogernomics and Ruthanasia, which he described as almost cultish. He's ex-army and has a history degree so knows a thing or two about source analysis.

Lord help us if that's true.

If you are an older home owner with other assets such as shares and rental property you could never really find a better Govt for you than this one. If you don't earn a salary (and why would anyone with assets actually bother)you would have to have at least 3 or 4 (normal) rentals for the higher tax rate to affect you at all. Share increases are tax free and most NZ shares have all or most tax already deducted from dividend income.
The fair and probably best way forward for NZ (certainly not for me) would be to have a tax system based on assets rather than income. But we have all seen how much fairness comes into the Govts decision making.

If you started on the build solution it would take 3 years before any results appeared
Assuming large scale housing construction
First you would have to dedicate the land
Then 1+ year to develop earthworks and roading and services
Then 2 years to build the houses from design to consent to build
Then you need added infrastructure, schools, shops, health centres, supermarkets

The only king hit solution is stamp duty (ingoing) plus a capital gains tax (outgoing) on existing houses

"The only king hit solution is stamp duty (ingoing) plus a capital gains tax (outgoing) on existing houses"

Neither of which would make house prices lower. Though they would disincentive house flipping.

Insatiable demand is driven by the "Tax Free Status" of housing. Change that and prices will subside

As they have in Australia?

The Insatiable demand is caused easy low interest rate lending, and fear of missing out. If I can borrow to buy a house and its its all other peoples money at a lower cost than I make then it is effectively infinite % return. I don't care if its taxed or not. What did article say "Christchurch house prices rose a modest +6.2%" that's a "modest" rise (not in my opinion), when you can get a loan from kiwi bank at 2.55%, why wouldn't you, tax or no tax.

This is not correct. It's the lack of residentially zoned land around Auckland that sets the house prices in NZ. That is easy and fast to fix.

Roger... so I guess you are saying it is easy to build at least 150K extra houses every five years (many in the Akld area) if we change the zoning and the RMA? I'm not so sure about that. In fact, in my view it would be a near on impossible target to regularly maintain.
Presuming we continue to welcome 500K more people to NZ every five years (once things normalize) about 150K new houses is the number required every five years just to ensure the problem doesn't get worse! Maybe there is a better way to bridge the gap between demand and supply.

Net migration has been nowhere near your 500k. Where does that come from?

You'd be lucky to get the new wastewater and water source/storage sorted for this scale of building sorted in 3 years. As our expectations of quality rise the costs and time to achieve it increase at greater rates as the easy options are gone.

Yeah I have found the quality of modern houses much better than old ones, oh wait I haven't.

Nah, if a massive build up miraculously kicked off, it would get priced in straight away.

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David.
A key issue is finding the productive investments that are languishing for lack of investor interest.
KeithW

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The Government would do well to consider the Law of Unintended Consequences as well. The majority of their policies have resulted in the opposite effect of what they desired.
- Ringfencing negative gearing has resulted in rents rising as landlords seek to recover the loss of the taxpayer subsidy from tenants. Imposition of other costs on landlords has done the same.
- Extension of the Brightline Test has resulted in a diminished number of houses being listed for sale, as owners hold on to them longer to avoid the tax penalty. Reduced supply of houses for sale has caused prices to sky rocket. A few years ago listings in my area were around 500, after 2018 and the new 5 year rule they dropped to around 300. They are now under 200.
- And re-imposition of LVRs in March will simply continue the trend that began when they were first introduced - it slowed the Auckland market down, but investors simply took their equity and deposits and invested in cheaper areas outside of Auckland, causing house prices throughout NZ to dramatically increase, locking out locals in those regional towns in the process.
The answer to a stable housing market is not more taxes. It is "Christchurch". Opening up new land to build on. Allowing sections to be subdivided and infill housing to be built. Lowering the minimum section size to enable units and townhouses to be built (eg. the little over-60's units now dotted all over Christchurch which allow elderly people to buy or rent homes much cheaper than standard housing). Last week I took a drive through the new subdivisions in Christchurch - there is no shortage of them, and most lots have Sold signs on them. Building is still happening at a great rate of knots, and as everyone building new homes frees up an established home, it helps add to the number of homes available to rent as well, thus keeping rents down.

Great summary!

Capital gains taxes, if introduced, will also create unintended consequences (this isn’t a comment on if CGT is equitable or desirable, simply that it may create further problems for housing).

With great respect, no shit Sherlock. The real question is why don’t policy wonks and politicians get it?

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I'm guessing they'll get it a lot quicker now that Wellington has started spiraling out of control. Things like migration and public transport issues in Auckland are easily ignored if they don't affect you directly and you get paid whether anything happens to address those things or not. Now that it's hitting closer to home and Wellington housing is taking off, you might see some actual, tangible change.

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Not all interest.co.nz readers are old enough to remember policy ideas/decisions from the Clark Government in a meaningful way. Great article for laying-it-all-out-there.. at the beginning of 2021.

I think Labour used 'Working for Families' to try and avoid dealing with increasing house prices .. now they use motels lol :)

Are recent stats on the motel use around? My anecdotal observation is the numbers being used have remained at lockdown levels huge and govt is still looking to buy motels that come to market as the rental costs are massive.

https://www.stuff.co.nz/national/300188321/seasonal-workers-and-holidaym...

Thousands of families are currently in emergency and transitional accommodation across New Zealand. Figures vary, but the most recent show 9823 people or whānau receiving an emergency special needs grant for motels in September. There are a further 3500 transitional housing places, some of which are motels but also hostels and shelters, private housing rented by the provider, or new builds.

And ever increasing.

Put in place a plan to pay out owner-occupiers on historical values like we did in Christchurch. Then collapse the whole bloody thing in on itself. If you want to sell your over-leveraged investment properties, then I'm sure HNZ would welcome the chance to take them off your hands for the value of the mortgage and not a cent more. Put things back to 3x - 4x and bring in as many tools from the toolkit (DTI, interest deductibility limits, stamp duties etc) to ensure it never happens again. No one ends up homeless, HNZ gets some housing stock and we can move on from a world where full-time workers need accommodation supplements just to get by, and spend that money on something else.

An excellent proposition. And don't forget it would be Christchurch without all the foundation/liquefaction and cracking-structure issues to contend with; inotherwords, a far, far easier build.
I bumped into a younger cousin at an oldie's funeral last year. He has been in Christchurch since the earthquake. He already had a foundation repair business in the North Island. He was telling me that whilst his company has been busy on the repair side of things, he himself has spent the last 10 years just doing court and arbitration work. He has had to move far away from Christchurch to get some peace from the constant phone calls and visits all hours of the day and night.
The new builds would preferably be built on marginal land so as not to diminish the quantity of good pastoral land.

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This article conspicuously doesn't mention that the 39% rate in 2000 kicked in at $60,000, which IIRC was about 10% of wage earners. Fiscal drag over the next decade meant that by the time the top threshold was increased to $70,000 in 2008, it was more like 15-20% of wage earners paying in that top bracket, where it has remained ever since because National repealed Labour's tax cuts that would have put the threshold up to $80,000.

Since the new threshold kicks in at $180,000 and is expected to cover 2% of wage earners, and generally the quantum of income over this threshold that is caught will be much less as total percentage of someone's income, and we're exceptionally unlikely to have wage inflation / fiscal drag over the next decade that inflates this any farther than 3%, this article is fairly specious in it's insistence that we're going to see exactly the same results this time as was seen last time.

This is yet another populist measure of a government which won't tackle the negative effects of inequality in this country at their source. Brackets should be adjusted to current incomes, that's well known but there are ways to tax the wealthy for real if they would really want that. Shame on them by carrying the Labour word on their name.

‘’House price increases in the Garden City have never taken off like in the rest of the country, and probably never will.’’
What a ridiculous statement. The so called investors (leaches) are buying up large in Christchurch, from all around NZ. This market is about to skyrocket. All in this article is poorly thought through and limited on reality.

The CCC has long complained bout 'urban sprawl' - seems to have been our saving grace. But I agree, prices seem to be going up here in Christchurch. Lot's of meth use here though, so good luck to speculators/investors getting regular rent payments.

Christchurch had a major disruptive event - 6,000 households left in 12 months, insurance claims went in, lots of properties were sold 'where is, as is', rental values increased suddenly due to demand from displaced people and transient workers etc, households were nervous about buying (landlords less so) etc. The situation was therefore highly complex. So, assuming that simply reducing consent barriers and increasing supply will deliver the 'Christchurch result' in other areas just seems naïve to me.

We also have to question why, despite the supply side Christchurch miracle, house price (and rent) affordability in Christchurch is about the same as in Wellington when you allow for wage levels! Could it be that house prices are actually determined less by glacially slow changes in supply and demand, and more by cost of ownership, rental yields, buyer confidence in rising prices, and what people can afford to pay?

The Christchurch situation has become very interesting, currently with lots of house building going on, plus new land developments all sold with titles still six months away. The only sections available (if any) are those held by building companies and even then, most of those building companies cannot offer anything available to be built on in the next six months as all are sold already subject to availability of titles.
KeithW

Yes, I've seen this happen before.

The off the plan sales are largely driven by banks now requiring up to 100% presales. This allows demand to buy to be tied up now, even though the finished product cannot be supplied and also transfers the one developer debt onto many individuals so de-risks it, except, of course, if the cost of the build goes up then the developer could be building at very little if any margin and the ability of end purchaser to settle might be also compromised if market drops.

Builders are busy but many making less due to their costs rising faster than the value of the property.

Also, I think councils have had their fill for infrastructure at the moment and are slowly tightening the zoning again.

I’m not sure that Christchurch is proof it would work; it could be a demand driven response especially with all those aftershocks and I imagine it’s expensive to get insurance.

Exactly. Do we know how many people left Christchurch after the major earthquakes?

Agreed, Christchurch was a very very complex situation and should not be over simplified.

Where I feel this article’s argument falls down is due to scale. Christchurch was one city and it took so many resources, companies, people and money from other areas to make it happen. We now need to repeat the process across the whole country. I just can’t see how we can and if we try will only result in a huge increase in building costs. Building costs being everything that a new subdivision needs btw: schools, roads, pipes, powerlines, general infrastructure.
We all want a silver bullet, but saying just allow more land like Christchurch is massively over simplifying things. None more do than not explaining where all the building resources will appear from to achieve it.

To fix this we need a cross party long term plan that acknowledges the complexities and time frame it will take.

That's right when supply can equal demand in almost developer real-time, then 'money looking for speculative gains home.' won't find it in residential property. And housing being built, no matter the volume, will stay more affordable.

But you are not summarising the Christchurch situation correctly and credit needs to be given where the credit is due.

The freely available land to build on was mainly in Selwyn and Waimak councils, and these councils had always, up until this point, been the poor cousins of Christchurch council. After the earthquakes, both councils had great motivation to grab as much of the Christchurch fleeing ratepayers as possible. This is known as competition.

Being smaller regional centers they were not infected with the compact city Walter Mitty syndrome and also had some immediate consents and subdivisions sitting idle from the GFC.

This can be seen in the consents per 1,000 pop. Christchurch had a brief number at 11 per 1000 over the Earthquake repair years but has fallen back to approx. 6.5/1000. However, Waimak at approx 12/1000 and Selwyn at up to 23/1000 are the true heroes.

Here is a NZ Stats link https://www.stats.govt.nz/news/46-year-high-for-new-home-consents and you can download the xl spreadsheet or Google 'building consent per 1000 territorial authority statistics NZ' to download territorial figures.

Simplistic article, in my opinion. It implies that there was a direct causal link between the change in the highest income tax rate in 1999 and the house price boom of the early 2000s. And, therefore, it follows, the same thing will happen now.
Although probably a factor, other factors such as large scale immigration probably had more impact. I don't think that house prices booming after late 2001 (9/11) is a coincidence...

Fritz... exactly. In the late 80s, early 90s I loaded up on Akld houses and land simply because I could see where the crazy immigration settings would lead us. Even back then I railed against it saying two things were almost assured. Immigration and the tax system would destroy the hopes of young Aklders and secondly make me rich.
Wasn't that long ago a house could appreciate 100k pa but our wonderful laws allowed you to claim 30 or 40K pa in DEPRECIATION which could be offset against your other income. I accumulated wealth fast while paying almost no tax. Everything has always set up to benefit the fortunate at the expense of the poor. Immigration settings and the accommodation supplement are further, more recent examples of this rort and yet instead of counting his blessings Ashely Church is currently bleating about how the Govt is anti-landlord.

Naturally you paid tax on all that land and housing you acquired with the intention of reselling at a profit, I assume?

He didn't say he was re-selling.

That's the key word David, on the title '..decade' - NZ is no longer the place for longer term, it's the place for short term gain then get out, imagine NZ in the form of BTC, most ride the waves with savviness, until...

Taxation does not finance the government. The government must first create currency by spending it into existence, taxation then returns it back to the government to be cancelled.
The Levy Economics Institute tells us this.
Publications
Working Paper No. 244 | July 1998
Can Taxes and Bonds Finance Government Spending?

This paper investigates the commonly held belief that government spending is normally financed through a combination of taxes and bond sales. The argument is a technical one and requires a detailed analysis of reserve accounting at the central bank. After carefully considering the complexities of reserve accounting, it is argued that the proceeds from taxation and bond sales are technically incapable of financing government spending and that modern governments actually finance all of their spending through the direct creation of high-powered money. The analysis carries significant implications for fiscal as well as monetary policy.
http://www.levyinstitute.org/publications/can-taxes-and-bonds-finance-go...

Wasn't the fact that a lot of people left Christchurch a big factor? So when the houses were rebuilt, there was a smaller population i.e. it was supply AND demand that did it?

Yepp

The government can't do anything much, because they promised no new taxes and not other tax changes apart from a new top tax rate.

We need a ghost house tax, as well as unimproved land taxes, but those probably won't come in until the horse as well and truly bolted.

Stopping overseas buyer for example was far too late, as the damage had already been done.

Also they need to stop importing our population, until we actually have enough houses to house those already in NZ. The current problem is a supply problem. That is caused by not enough houses, which is partly due to perfectly good houses being left empty or used as airBNBs, as they make more money from capital gains, than having to deal with the hassle and risks of renting them out.

I predict house prices will track on the same trajectory for at least the next 6 months, as there are a lot of older people cashed up with money in current accounts at the banks looking for houses, as they aren't earning anything at the bank due to the record low interest rates. Also a lot of FOMO people still wanting to buy their first home, just to get it over with, as they think house prices will always continue to go up by similar amounts. They will end up paying for much of the rest of their working life. The funny thing is that it is now cheaper to build than buy existing houses in some areas, on the same sized land etc.

Just build lots of state housing as Labour should have done for the last 3 years (a fantastic government investment by the way, not to mention cost saving not having to pay for families to stay in motels for $1,000 per week, plus minimising the societal long term costs..) instead of relying on private developers. No wonder KiwiSaver failed.
There is a housing shortage problem, not a home ownership problem.
Regarding "RMA/urban-rural boundaries/etc"... They are there for good reason. If developers are permitted to build subdivisions willy nilly in remote/rural environments they should at least have to bear the FULL cost of infrastructure rather than being subsidised by the council (i.e. ratepayers) who may have to wait decades to get the return from rates to cover the tue costs.

Yes, that is exactly what we should be doing, allowing developers to build in rural environments, organizing and paying for the infrastructure themselves. It would result in higher quality housing at far more affordable prices, as happens in jurisdictions that allow that.

Um a small correction here, DC. "the whole eastern section of that city [Christchurch] to be basically abandoned".

Bzzt, wrong. Only about 9000 properties (out of 160K) were red-zoned , and those mainly around the soggy Avon River, quelle surprise. Most of 'The Eastern Suburbs', e.g.Prestons in the north-east, are thriving and actively building and growing. And Christchurch is, thanks to the benevolent dictatorship of one Gerry Brownlee (who threw the stupidly restrictive zonings under the proverbial bus), easily the most affordable major city in the country. House plus plot prices start with a 4.......

But the government are building 100'000 affordable homes, surely that will help with supply.

Yip, and don't forget it will also affordable with current NZ average salary/wages - the remaining price delta will be handled by RBNZ & Govt.

Logic would tell us you can't get blood out of a stone , so taxing those who have money above quite a high level will at least produce some revenue .